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Obamacare question: What if I don't qualify for a subsidy?

by Jaclyn Cosgrove Published: October 23, 2013

Next year, more than 300,000 Oklahomans are likely eligible for  tax credits, or subsidies, that will help them pay for health insurance premiums.

However, most people who qualify either don’t know what the subsidies are or that they qualify for them.

Under the Affordable Care Act, also known as “Obamacare,” people who have a household income between 100 percent and 400 percent of the federal poverty level might qualify for subsidies — essentially money to help them pay for health insurance.

Families USA released a report earlier this year that found that most Oklahomans (90 percent) who will be eligible for premium tax credits will be in working families.

Statewide, about 302,000 people — the majority of Oklahomans who will be eligible for premium tax credits — will be in families with a worker who is employed, either full- or part-time.

I’ve been answering questions about the Affordable Care Act from readers, and the topic of how subsidies work came up in a recent question.

Question: My 27-year-old son left [work] to go to college. Working part time and going to school, his estimated income might be around $11,000 this year. He has no dependents and is moving in with us to save on expenses. He needs healthcare. He does smoke. What options does he have for healthcare?

Answer: Based on a quick calculation of your son’s income, he unfortunately might fall into what some have dubbed the “coverage crater.”

Essentially, the term “coverage crater” refers to people who make “too much” to qualify for Medicaid and “too little” to qualify for a subsidy to pay for health insurance. Let’s expand on that.

Originally under the Affordable Care Act, states had to expand their Medicaid programs, or risk getting their Medicaid funding pulled by the federal government. But the U.S. Supreme Court ruled that the federal government essentially couldn’t punish states that didn’t expand their Medicaid programs by taking away their Medicaid money. Expanding Medicaid in Oklahoma would have involved changing eligibility requirements, and more people could have qualified for Medicaid.

Oklahoma is among about 20 states that aren’t expanding Medicaid. Because Oklahoma isn’t expanding Medicaid, there’s a group of people — your son included — who don’t qualify for Medicaid or a subsidy.

That’s because the subsidies start for folks who make 100 percent to 400 percent of the federal poverty level.

Your son, based on his income of $11,000, is at 96 percent of the federal poverty level. He’s not quite to 100 percent of the federal poverty level and therefore likely doesn’t qualify for a subsidy. And he likely doesn’t qualify for Oklahoma’s current Medicaid program. Hence — the coverage crater.

This Oklahoma Watch story gives estimates, based on Census data, of just how many people fall into the coverage crater in Oklahoma:

When the government starts helping low-wage workers pay for health insurance next year, 6,704 Oklahoma cooks will be left empty-handed.

So will 6,154 cashiers, 4,572 waiters, 4,207 housekeepers and 3,870 retail salespeople, an Oklahoma Watch data analysis shows.

 They are among 109,227 uninsured Oklahoma workers whose annual incomes fall below the federal poverty level, making them ineligible for health-insurance tax credits that take effect in January.

However, if your son made $490 more ($11,490), according to the Kaiser subsidy calculator, he could potentially qualify for a subsidy of $2,427. The cost for a silver plan, one of the four plans available through the health insurance marketplace, would be an estimated $2,657. So he would be looking at paying $230 for the year, or about $20/month for coverage.

Some parents and adult children likely have questions about how to calculate household income when signing up for the marketplace. I have asked the U.S. Department of Health and Human Services folks about how household income is defined.

I was told that if an adult child isn’t counted as a dependent of his/her parents, the adult child does not include their income as household income when signing up for a plan in the marketplace.

Additionally, this article from NPR has a lot of answers to questions that young people might have about the Affordable Care Act, including information on insurance coverage known as a catastrophic plan, which are available for people up to age 30:

People up to age 30 will have the option of buying a catastrophic plan that will cover only minimal services until they meet a deductible of roughly $6,400. The premium is usually much lower than the other plans. After the deductible is met, the plan covers the 10 essential health benefits — a kind of “safety net” coverage in case you have an accident or serious illness, according to the Healthcare.gov website. Catastrophic plans usually do not provide coverage for services like prescription drugs or shots. And there are other limits.


by Jaclyn Cosgrove
Medical and Health Reporter
Jaclyn Cosgrove writes about health, public policy and medicine in Oklahoma, among other topics. She is an Oklahoma State University graduate. Jaclyn grew up in the southeast region of the state and enjoys writing about rural Oklahoma. She is...
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